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What you need to know before buying in a homeowners’ association

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The pros and cons of living in a homeowners’ association, condominium community, or planned development

Liz Kuball

More than a quarter of Americans live in communities governed by some type of homeowners’ associations (HOA), according to reports from the Foundation for Community Association Research. According to the organization’s 2018 report most of these homeowners (63 percent, according to the report) believe that their association's rules protect and enhance their property value. But you may not realize that seemingly small things—like planting a tree in your front yard, or painting your house—can lead to violations if you don’t get proper approvals.

Critics can see community associations as nanny states thanks to the negative media attention that can erupt over trivial things like landscaping, but the data shows that 85 percent of Americans are satisfied with their associations. Even still, not understanding the intricacies and fees related to an HOA can invite unfortunate surprises, so a buyer walking away from the closing table should know what they’re walking into.

What is an HOA and how does it work

A homeowners association is a group of homeowners in a community or building that have a formal agreement to collectively manage common areas and share the associated costs. Homeowners’ associations are also like governments in some ways: They set rules for the community, hire vendors, pave roads, repair roofs and fences, and handle disputes.

In planned communities, the land developer outlines certain rules and restrictions concerning the use of a planned community. Then the developer turns over the operation and governance of the association to an elected board of homeowners (comprised of volunteers) whose job is to run the community and maintain its budget.

“The board will typically hire a management company and a lawyer to assist them, but they are not required to,” according to Gary M. Singer, managing attorney at Law Firm of Gary M. Singer, P.A in South Florida. The establishment of HOAs is different for every community, and understanding those differences before purchasing will make the process less stressful.

Fees associated with HOAs

HOA fees are broad and can range from as low as $90 a year and up to $900 a month or even more. That money goes towards your association’s regular expenses and savings for future expenses (the “reserve”); the more you pay, the more the association likely does in the community. Ask about the history of the HOA’s fee increases to get a sense of how they’ll rise in the future.

A prospective buyer will also want to know if there are any upcoming assessments, says Melanie Narducci, realtor at The Real Estate Firm in Arizona, since these are out of pocket costs that are charged by the HOA and not paid from reserves.

The benefits of an HOA

If you’re averse to the upkeep that comes with owning a home, a community with an HOA may be your solution. An HOA can take care of exterior maintenance like lawn care and roofing, and the association rules ensure that neighbors will keep their properties in good condition, too, which helps maintain your home’s value.

You’ll also likely have access to shared amenities such as pools, playgrounds, lakes, and security that require no maintenance from you, says Narducci.

The downsides of an HOA

Not every HOA is created equally, so pay careful attention to content of the documents and bylaws provided by the seller or developer. Narducci points out that the conditions and covenants can dictate things like home paint colors, the number of pets you can have, how large those pets can be, and the number of required trees in front yards. They’ll also include details about move in and move out fees and architectural restrictions, so make sure to review them closely. For example, if your bylaws don’t accommodate an overnight guest, you may unhappily discover the next day that your guest’s car was towed.

If you are a DIY creative who wants to live out your Fixer Upper dream, think twice about an HOA. Having someone dictate the color of your front door and the shape of your garden might be a recipe for disaster.

Very good to know

  • Some attorneys dedicate their entire careers to working with and understanding HOAs, so if you’re thinking about purchasing a home in a planned community, be sure to hire a professional that specializes in this type of transaction.
  • HOAs typically have the right to fine people. For example, if you or your guest are speeding in the community, your HOA can issue a fine against your house.
  • If you don’t pay your dues, your HOA often has the right to foreclose and take your home away from you—even if you are paying your mortgage.
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